Elina Kurkela 

Drivers and challenges of circular business models: 

Comparative case study in textile industry  

 

 

 

 

 

 

 
  

Vaasa 2020 

School of Management 
Master`s thesis in Economics and Business Administration 

Strategic Business Development 
   



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UNIVERSITY OF VAASA 
School of Management 

Author: Elina Kurkela 
Title of the Thesis: Drivers and challenges of circular business models:  Comparative 

case study in textile industry 
Degree: Master of Science in Economics and Business Administration 
Programme: Strategic Business Development  
Supervisor: Anni Rajala 
Year: 2020 Pages: 78 

ABSTRACT: 
The aim of this research is to advance knowledge of circular business models and the drivers and 
challenges related to the implementation of these models. Textile industry is the world`s second 
most polluting industry and the current linear “take-make-waste” model of this industry cannot 
continue. Circular economy and circular business models are solutions for the current unsus-
tainable linear economic model. Circular economy bases on the idea of restorative and regener-
ative production and consumption systems. The aim of these systems is to keep materials and 
products as their highest utility for as long as possible. Despite the growing popularity of circular 
economy, it is still a poorly understood concept and the implementation of circular business 
model is even more uncertain. Thus, this thesis explores circular business models in textile in-
dustry as well as the factors which strengthen or hamper the implementation of a circular busi-
ness model. This study is conducted as a comparative case study that reflects the circular busi-
ness models of developing and established textile companies. The empirical research was con-
ducted through four semi-structured interviews with Finnish textile companies. Furthermore, 
this research follows a deductive approach as the research continues from theory to empirical 
testing. The findings of this research explain different circular business models and the drivers 
and challenges related to the specific circular business model. The research results show what 
business actions each company operated to create a circular business model. Furthermore, this 
research analyzes the differences and similarities between developing and established textile 
companies. Circular business models of case companies varied with each other, but the main 
drivers and challenges were similar. The main drivers related to circular economy were social 
and cultural issues whereas the main challenges related to circular economy were the lack of 
technological development. The outcomes of this study will support textile companies to ana-
lyze different options of implementing circular economy and the things which will either 
strengthen or hamper the implementation.  
 
 
 
 
 
 
 
 
 
 
 
 
 

KEYWORDS: circular economy, business models, sustainable development, product life cycle, 
textile industry 



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Contents  

1 Introduction 7 

1.1 Research gap 9 

1.2 Objectives and research questions 10 

1.3 Thesis structure 11 

2 Circular economy 12 

2.1 Circular business model 17 

2.2 Implementing circular business model 19 

2.2.1 Challenges of circular business models 20 

2.2.2 Drivers of circular business models 23 

2.3 Circular business model innovation 27 

2.3.1 Degree of circularity 28 

2.3.2 Six cycles 29 

2.3.3 Closing, slowing and narrowing 30 

2.3.4 Business model archetypes 30 

2.3.5 ReSOLVE framework 31 

2.4 Theoretical framework 34 

3 Methodology 36 

3.1 Research method 36 

3.2 Case selection process 37 

3.3 Data collection and analysis 39 

3.4 Quality of the research 41 

4 Findings 42 

4.1 Circular economy: ideology of a company 42 

4.2 Circular economy: rational choice of a company 46 

4.3 Circular economy: business model for textile companies 50 

5 Discussion and conclusion 57 

5.1 Circular business models of textile companies 57 

5.2 Circular economy drivers of textile companies 61 



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5.3 Circular economy challenges of textile companies 64 

5.4 Managerial implications 67 

5.5 Limitations and suggestions for future research 68 

References 70 

Appendices 78 

Appendix 1. Interview questions 78 

  



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Figures 
 
Figure 1. Theoretical framework 35 

Figure 2. Modified research framework 67 

   

 

Tables 
 
Table 1. Definitions of circular economy 13 

Table 2. Challenges and drivers of circular economy (modified based on Jesus & 

Mendonça, 2018 and Rizos et al., 2016) 27 

Table 3. Expanded ReSOLVE framework (Modified based on EMF, 2015; Lewandowski, 

2016 and Ceptureanu et al., 2018) 34 

Table 4. Summary of the case companies 39 

Table 5. Summary of the interviewees 40 

Table 6. Summary of the findings 51 

Table 7. Summary of the business activities of case companies 61 

 



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1 Introduction 

The main purpose of this study is to increase knowledge of circular business models in 

the textile industry. Our current unsustainable “Take-Make- Waste” model bases on a 

linear economic model, causes several environmental problems and will sooner or later 

reach a sustainability dead-end as Earth’s resources will be overloaded (Antikainen & 

Valkokari, 2016). A linear economy is characterized as converting natural resources into 

waste via production. This production of waste leads to the deterioration of the environ-

ment in two ways: by the removal of natural capital from the environment and by the 

reduction of the value of natural capital caused by pollution from waste. (Murray, Skene 

& Haynes, 2017.) Scientific evidence shows that the linear economy is unsustainable in 

terms of all three dimensions; economic, environmental and social. Deserts are expand-

ing, sea level is rising, and per capita consumption is increasing. In other words, the 

global natural ecosystem is decreasing size and volume. A simple and logical answer to 

this challenge is to change the current linear model to circular. (Korhonen, Honkasalo, & 

Seppälä, 2018.)  

 

Circular economy bases on restorative and regenerative production and consumption 

systems. These systems aim to keep materials and products at their maximum utility for 

as long as possible. (Ellen MacArthur Foundation [EMF], 2013). To stimulate and foster 

the implementation of the circular economy, comprehensive knowledge about designing 

circular business models is needed (Lewandowski, 2016). Circular business models have 

been identified as important enablers for companies moving towards circular practices 

(Nußholz, 2018). Furthermore, switching from a linear model to a circular one has at-

tracted increased attention since circular business models are noticed as a novel way of 

creating, delivering and capturing social, economic and environmental value (Antikainen 

& Valkokari, 2016). Hence, circular business models are increasing their importance con-

tinually. Furthermore, when companies are implementing a circular business model, 

they must identify the drivers and challenges which they may confront. The drivers are 

factors that enable and encourage the transition towards a circular economy, while the 



8 

challenges are bottlenecks that obstruct transition towards a circular economy. (Jesus & 

Mendonça, 2018.)  

 

To understand the concept of circular economy, it is necessary to explain its origins. How-

ever, the origins of the circular economy concept are unclear, and the term circular econ-

omy has thus been connected with different meanings and associations by different au-

thors, but the concept of a cyclical closed-loop system is what these meanings generally 

have in common. (Murray et al., 2017.) Ecological economist Kenneth Bolding (1966) first 

presented the idea of a closed-loop economy where the circular system is seen as a pre-

requisite for the maintenance of the sustainability of human life on Earth (Ghisellini, 

Cialani, & Ulgiati, 2016). Perhaps the most influential background concept of circular 

economy is the cradle-to-cradle concept which is however highly idealized. It relies 100% 

on renewable energy and recycles all the material and thus it is not realistic. (Korhonen 

et al., 2018.) Circular economy offers a distinct approach giving a new life and more com-

prehensive meaning to these already well-known concepts of cradle-to-cradle and 

closed-loop system (Urbinati, Chiaroni, & Chiesa, 2017). Furthermore, the concept of  

circular economy provides an alternative model to understand and analyze consumption 

(Ranta, Aarikka-Stenroos, & Mäkinen, 2018).  

 

The concept of circular economy has been able to attract attention since it makes com-

mon sense: it is more profitable to use value many times, not only once (Korhonen et al., 

2018). Circular business model is supposed to lead to more sustainable development 

and harmonious society, and over the last decade, this concept has gained growing at-

tention world-wide (Ghisellini et al., 2016). Ellen MacArthur Foundation [EMF] (2015) 

proposed that sector-by-sector analysis could deliver valuable understandings and ad-

dress the main opportunities and challenges around the circular economy transition. The 

chosen industry for this study is textile industry. This is because textile industry, with its 

current linear model, is the world`s second most polluting industry (Waste & Resource 

Action Programme, 2012). The necessity to move towards circular model is indicated by 

the textile industry experts. Textile industry must replace the take-make-waste model 



9 

with a circular one to mitigate the negative environmental impacts that the industry 

causes. (Koszewska, 2018.)  

 

 

1.1 Research gap 

In the last few years circular economy has received increasing interest worldwide (Ghis-

ellini et al., 2016). The concept of circular economy is currently promoted by EU, by sev-

eral national governments, and by numerous business organizations. The concept has 

been formed mostly by practitioners, the business community and policymakers. How-

ever, the scientific research of circular economy remains still quite unexplored. (Korho-

nen et al., 2018.) Practice is ahead of the academy and thus studying a real-life case is a 

valuable method of contributing to academic discourse (Bocken, Short, Rana, & Evans, 

2014). Furthermore, scholars in the strategic management field are still struggling with 

a lack of framework describing how organizations that would like to become circular 

could implement circular business model to their existing business (Urbinati et al., 2017).  

 

The circular economy has arisen as a key approach in the transition to a more sustainable 

economic model, but it is still a poorly understood notion (Jesus & Mendonça, 2018). 

There is a lack of information about the process of implementing the circular business 

models and the typologies which would clarify different circular business models (Urbi-

nati et al., 2017). Implementing a circular business model requires identifying the factors 

that foster and hamper the transition towards circular business model, but these drivers 

and challenges are barely observed in the academic literature (Jesus & Mendonça, 2018). 

Furthermore, understanding is lacking concerning how the adoption of circular economy 

generates value in a business context even though the circular economy promises to 

create economic value alongside with social and environmental value  (Ranta et al., 

2018).  

 

Even though there are success stories of circular economy implementation into business 

model (EMF,2013), there is still a lack of understanding of the concept comprehensively. 



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The adoption of circular economy requires new knowledge to fill in the gaps of business 

opportunities, drivers and challenges related to circular business models (Jesus & Men-

donça, 2018). Further research is necessary in the field of circular economy implemen-

tation at the company level (Murray et al., 2017). Although there are studies about cir-

cular business models (Ceptureanu, Ceptureanu, Gert, & Murswieck, 2018; Heyes, 

Sharmina, Mendoza, Gallego-Schmid, Azapagic, 2018; Lewandowski, 2016) as well as the 

drivers and challenges of circular economy implementation (Jesus & Mendonça, 2018; 

Rizos, Behrens, Gaast, Hofman, Ioannou, Kafyeke, Flamos, Rinaldi, Papadelis, Hirschnitz-

Garbers & Topi, 2016), the connection between drivers and challenges to circular busi-

ness models is unclear. The lack of research might hinder the implementation of circular 

economy to business. Thus, this thesis seeks to fill in the gap of circular business models 

and their drivers and challenges by combining and analyzing these concepts through 

case studies at the company level. 

 

 

1.2 Objectives and research questions 

The main objective of this research is to study the circular business models in the textile 

industry and the drivers and challenges related to the implementation of circular busi-

ness model. This research aims to deeper the existing literature about circular business 

models and identifies the main challenges and drivers related to a specific circular busi-

ness model. These objectives will concentrate on Finnish companies operating in the 

textile industry. By following this road, the research aims to clarify the existing literature 

about circular business models and the effective implementation of these models. These 

research objectives are analyzed by answering the following research questions:  

 

RQ 1. What are circular business models?  

RQ 2. What are the drivers of implementing a circular business model?  

RQ 3. What are the challenges of implementing a circular business model? 

 



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One key aim of this research is to clarify the context of a circular business model and 

increase knowledge about the business actions which circular business models comprise. 

To analyze the circular business models comprehensively, also the drivers and challenges 

are being analyzed. Despite the increasing popularity of circular economy, it is still rela-

tively inadequately understood concept and the methodologies for the actual imple-

mentation of circular economy are even more uncertain (Jesus & Mendonça, 2018). To 

clarify the actual implementation of circular economy, the above-mentioned research 

questions were formulated.  

 

 

1.3 Thesis structure  

This research is structured in five main chapters. The thesis first introduces the back-

ground of the topic, discusses the needs in the field and raises knowledge about the 

studied topic. Furthermore, the research objectives and research questions are ex-

plained and presented. The second chapter presents the context of the study which is 

circular economy business models and the drivers and challenges related to the imple-

mentation of circular business models. The chapter begins with a deeper understanding 

of the terms circular economy and circular business model. The literature review covers 

the concepts of circular business model innovation, drivers and challenges of circular 

business models and different categories of circular business models. Last, the theoreti-

cal framework of the circular business model is introduced. The theoretical part is fol-

lowed by the methodology that presents the research method, case selection, data col-

lection, and analysis. Furthermore, these methodological choices are explained in detail, 

and the trustworthiness of this study is presented. The fourth chapter presents the ana-

lyzed data collected through empirical research. Furthermore, the last chapter compares 

the results to the theory, answers to the research questions and objectives, and presents 

managerial implications, limitations, and suggestions for future research. 



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2 Circular economy  

As a term, circular economy has both a linguistic and descriptive meaning. Linguistically 

it is the opposite of a linear economy where natural resources are becoming waste via 

production. The descriptive meaning of the term relates to the concept of cycles which 

are biogeochemical cycles and the idea of recycling products. Biochemical cycles de-

scribe the circulation of natural resources such as water which evaporates from the 

ocean, forms clouds, rains down and flows back to the ocean. (Murray et al., 2017.) Cir-

cular economy should exploit nature`s cycles for preserving materials, energy, and nutri-

ents for economic use and limit the throughput flow to a level that nature tolerates 

(Korhonen et al., 2018). Circular economy aims to maintain materials in use for as long 

as possible and preserve or even upgrade their value through services and intelligent 

solutions (Antikainen & Valkokari, 2016). Keeping the resources in cycles for as long as 

possible will increase the overall resource efficiency and produce additional revenue 

from multiple cycles (Ranta et al., 2018). Several definitions of circular economy have 

been presented, and table 1. presents these definitions. 

 

 

Author Definition of Circular Economy 

Murray et al. (2017)  

 

 

“an economic model wherein planning, 

resourcing, procurement, production and 

reprocessing are designed and managed, 

as both process and output, to maximize 

ecosystem functioning and human well-

being”. 

Ghisellini et al. (2016) 

 

 

“More than a trend-based model, CE may 

rather be considered a way to design an 

economic pattern aimed at increased effi-

ciency of production (and consumption), 

by means of appropriate use, reuse and 



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exchange of resources, and do more with 

less.” 

Ellen MacArthur Foundation (2013, 2015) 

 

 

“an industrial system that is restorative or 

regenerative by intention and design. It 

replaces the ‘end-of-life’ concept with res-

toration, shifts towards the use of renew-

able energy, eliminates the use of toxic 

chemicals, which impair reuse, and aims 

for the elimination of waste through the 

superior design of materials, products, 

systems, and, within this, business mod-

els’’ 

Geng and Doberstein (2008)   “a circular economy approach encourages 

the organisation of economic activities 

with feedback processes which mimic nat-

ural ecosystems through a process of ‘nat-

ural resources→ transformation into 

manufactured products → byproducts of 

manufacturing used as resources for 

other industries.” 

Sauvé, Bernard & Sloan (2016) Circular economy refers to the “produc-

tion and consumption of goods through 

closed loop material flows that internalize 

environmental externalities linked to vir-

gin resource extraction and the genera-

tion of waste (including pollution)’’ 

 

Table 1. Definitions of circular economy 

 



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Murray et al. (2017) defined circular economy as an economic model where planning, 

resourcing, procurement, production and reprocessing are designed and managed to 

maximize ecosystem functioning and human well-being. However, circular economy 

should not be considered as a new trend-based growth model but rather a way to design 

an economic pattern aimed to increase the efficiency of production and consumption, 

through appropriate use, reuse, and exchange of resources. Thus, circular economy has 

the potential to help society to reach increased sustainability and wellbeing at low or no 

material, energy, and environmental costs by implementing radically new systems. (Ghis-

ellini et al., 2016.) By replacing existing linear consumption economy model where raw 

materials are extracted, processed into finished products and become waste after they 

have been consumed, with new systems where resources are reused and kept in a loop 

of production and usage, allow to generate more value for a longer period (Urbinati et 

al., 2017). This is done by using cyclical material flows and renewable energy sources 

(Korhonen et al., 2018).  

 

The most acclaimed definition which incorporates elements from various disciplines has 

been developed by the Ellen MacArthur Foundation (2013) which introduced the circular 

economy as an industrial economy that is restorative or regenerative by intention and 

design. Such systems focus to keep the products and materials at their highest utility 

within technical and biological cycles (EMF, 2013). Likewise, Geng and Doberstein (2008) 

described the circular economy as the realization of closed-loop material flow in a whole 

economic system, which encourages economic activities with feedback processes that 

mimic natural ecosystems by transforming manufactured products and byproducts into 

resources for other industries. Furthermore, Ellen MacArthur Foundation emphasized 

that products should be designed in such way that waste does not exist, this means that 

products should be designed and optimized for a cycle of reuse. Overall, the definition 

of circular economy by Ellen MacArthur Foundation (2013) rests on the following three 

principles; preserve and enhance natural capital, optimize resource yields and foster sys-



15 

tem effectiveness. These three principles can translate into six different ways to be cir-

cular: regenerate, share, optimize, loop, virtualize and exchange – together the ReSOLVE 

framework (EMF, 2015).  

 

So-called loops are a common way to describe circular economy. For instance, Sauvé et 

al. (2016) presented that circular economy refers to the production and consumption of 

resources by closed-loop material flows. This bases on the idea that products and mate-

rials continue to circulate in loops for as long as they can create value, while simultane-

ously promote activities that reduce the need for the material per unit of value produced 

(Ranta et al., 2018). These closed material loops are prerequisites which means that ma-

terials are reused again as products or components (Lahti, Wincent, & Parida, 2018). As 

stated in the research of Su, Heshmati, Geng and Yu (2013) the term circular economy is 

based on the analysis of the relationship between economic and natural systems which 

emphasize a closed-loop of material flows in the economy. A circular economy is under-

stood as the realization of closed-loop material flow in the whole economic system 

(Geng & Doberstein, 2008). Resources are reused and kept in a closed-loop system to 

generate more value for a longer period (Su et al., 2013). Urbinati et al. (2017) presented 

four loops that underline the efficient use of products intending to maintain them into 

the economy through product-life extension, reuse, remanufacturing and recycling. Or-

ganizations must redesign the current economic system, largely based on linear resource 

flows, towards closed-loop resource flows that can preserve the embedded environmen-

tal and economic value in resources for as long as possible (Nußholz, 2018).  

 

The circular economy mainly emerges in the literature through three main actions, the 

so-called 3R`s principles which are reduction, reuse and recycle (Ghisellini et al., 2016). 

Furthermore, the fourth principle” recover” has been added as one of the actions 

(Kirchherr, Reike, & Hekkert, 2017). The first principle “reduction” indicates to minimize 

the amount of raw materials, energy and waste by increasing efficiency through upgrad-

ing technologies, simplifying packaging and using more power-efficient machines (Su et 

al., 2013). The reduce principle has the most diverse practical implementation because 



16 

it addresses to eliminate the need of the following principals: reuse or recycle (Ranta et 

al., 2018). The second principle “reuse” refers to using the by-products and wastes from 

one organization as resources to another organization, and thus using the resources to 

its maximum capability (Su et al., 2013). The reuse of products is environmentally very 

beneficial as it requires less resources, energy, and labor (Castellani, Sala, & Mirabella, 

2015). The third principle “recycle” refers processing the recyclable products back into 

materials and then into new products (Su et al., 2013) and the last principle “recover” 

refers to transforming waste materials or residual flows into energy by incineration and 

gasification (Kirchherr et al., 2017).  

 

In addition, Bocken, Pauw, Bakker and Grinten (2016) defined characteristics of the cir-

cular economy as business model strategies that are slowing, closing and narrowing ma-

terial and energy loops. Similarly, Nußholz (2018) presented the two circular strategies 

to reduce resource production by first slowing resource loops and the closing resource 

loops. “Slowing resource loops” can be done through the design of long-life goods and 

product-life extension such as repair and remanufacturing while “closing resource loops” 

is recycling where the loops between post-use and production are closed. These two 

approaches are distinct from a third approach which is “narrowing resource loops”, 

aimed at using less resources per product. (Bocken et al., 2016.) Based on these contri-

butions about closing, slowing and narrowing Geissdoerfer, Savaget, Bocken and Hultink 

(2017) defined circular economy as a regenerative system in which resource inputs are 

reduced by slowing, closing, and narrowing material and energy loops which can be 

achieved through long-lasting design, maintenance, repair, reuse, remanufacturing, re-

furbishing, and recycling.  

 

In this thesis, circular economy is defined by combining the above-mentioned definitions. 

The foundation of the definition bases on the principle of sustainability where circular 

economy aims to meet economic, social and environmental benefits (Lahti et al., 2018). 

This is accomplished by closing, slowing and narrowing energy and material loops 

(Bocken et al., 2016) which means that products and materials continue to circulate in 



17 

loops for as long as they can create value (Ranta et al., 2018). Additionally, circular econ-

omy is an industrial economy that is restorative and regenerative by intention and design 

(EMF,2013). In other words, circular economy contributes to all three dimensions of sus-

tainability with considered actions that aim to keep the resources in closed loops to gen-

erate more value.  

 

 

2.1 Circular business model 

The concept of business model is a relatively new matter and it emerged for the first 

time in an academic article by Bellman, Clark, et al. in 1957. However, it first gained 

greater significance when the business model was no longer seen as only an operative 

plan for creating an information system. The business model first advanced technological 

development and created electronic businesses. At that time the importance of business 

models was understood as an organization`s contribution to the success of management 

in the decision-making process. (Wirtz, Pistoia, Ullrich, & Göttel, 2016.) Since the 2000s, 

the concept of business model has increased its popularity in the strategic management 

literature, but despite this evolution, the academic literature has not managed to pro-

vide a unified understanding (Maucuer & Renaud, 2019). Despite the lack of congruent 

definition, there are some agreements regarding the central characteristics of the term 

business model (Wirtz et al., 2016). 

 

The literature introduces several perspectives about the business model concept. Zott 

and Amit (2010) conceptualized an organization`s business model as a system of inter-

dependent activities of how an organization performs business. Teece (2010) described 

that a business model expresses how the company will transform resources and capabil-

ities into economic value. More specifically, Osterwalder, Pigneur and Tucci (2005) de-

scribed the business model as a view of the organization`s logic for producing and com-

mercializing value. Their view also contained the value proposition, value creation, value 

delivery, and value capture. Although Zott and Amit (2010) emphasized the activity sys-

tem as a key to understand organizations business model, they also defined that the 



18 

complete goal of a business model is to exploit a business opportunity by creating value 

for the stakeholders involved such as fulfill customer`s needs, create customer surplus 

and generate a profit for the organization and its partners. According to Teece (2010), a 

good business model will deliver significant value for customers and collect a profitable 

part of this in revenues.  

 

To understand the idea of a circular economy one must first understand the current lin-

ear economy model. Existing linear consumption economy models base on the idea 

where raw materials are processed into finished products and after consuming, they be-

come waste (Urbinati et al., 2017). This linear throughput flow model has caused serious 

environmental damage (Korhonen et al., 2018) and it is now losing its popularity, with 

non-renewable natural resources decreasing and becoming more expensive (Antikainen 

& Valkokari, 2016). The value creation of linear business models is based on a material 

flow where resources become waste when they are no longer working or no longer sat-

isfy the organization`s needs (Urbinati et al., 2017). Transforming from a linear to a cir-

cular business model, with improved efficiency, recycling, and sustainability requires in-

vestment by all stakeholders involved in the company’s collaborative network (Lahti et 

al., 2018). However, the relationship between circular and linear business model is stud-

ied in the literature and researchers have noticed that every business model is both lin-

ear and circular to some degree because every company optimizes and virtualizes its 

processes on small scale, for instance, using e-mails in preference to traditional letters 

(Lewandowski, 2016).  

 

Stakeholders are more and more requiring organizations to adapt sustainability issues 

for the total value chain and thus organizations are now facing new challenges to develop 

and maintain performance while transforming its business model (Joyce & Paquin, 2016). 

According to Richardson (2008), a repeated theme in the discussion of both business 

models and strategy is value. He mentioned how the business model framework is orga-

nized around the concept of value, the value proposition, the value creation, and the 

value capture. In addition, for the circular economy to increase as the new business 



19 

model it must deliver its value promises to deliver economic growth alongside sustaina-

bility (Ranta et al., 2018). The circular business model differs from the traditional one by 

creating value for a wider scope of stakeholders and concentrating on the benefits of 

also social and environmental perspectives (Antikainen & Valkokari, 2016).  

 

A circular business model can be identified as a rational way of how the company creates, 

delivers and captures value in closed material loops (Antikainen & Valkokari, 2016). The 

creation of the circular business model is designed to create and capture value while 

helping to accomplish an optimal state of resource usage such as finding a model that 

comes close to achieving the complete cycling of materials (Lahti et al., 2018). Re-

searches concentrating on the circular economy from a business model perspective have 

used the sustainable business model approach which compounds environmental, social 

and economic value perspectives (Ranta et al., 2018). Rather than focusing entirely on 

creating economic value, the literature about sustainable business, which can be re-

garded as a subgroup of circular business model, takes into consideration the benefits 

from social and environmental perspectives as well (Antikainen & Valkokari, 2016). 

Hence, the purpose of the business model changes from making profits via the sale of 

products to making profits via the flow of resources, materials, and products (Lahti et al., 

2018). 

 

 

2.2 Implementing circular business model  

Despite the existing success stories of implementing a circular business model, a large 

scale of implementation needs radical changes and strong commitment from higher 

management (Lieder & Rashid, 2016). Circular business model must deliver its promises 

to provide economic growth and sustainability to succeed. However, if this business 

model is not capable to compete economically with the linear model, the implementa-

tion will be almost impossible. (Ranta et al., 2018.) Investing in implementation is im-

portant as organizations face multiple challenges in the adoption of circular business 

models. These challenges can involve uncooperative culture regarding ecological issues, 



20 

financial challenges, inadequate government support, administrative burden, insuffi-

cient information, and technical skills and insufficient support from the supply and de-

mand network. (Heyes et al., 2018.) These challenges and drivers will be discussed in the 

next chapters.  

 

 

2.2.1 Challenges of circular business models 

Several challenges have been discovered in the existing research about the implementa-

tion of the circular economy (Geng & Doberstein, 2008; Su et al., 2013). Studying and 

understanding these uncertainties and challenges that exist for companies desiring to 

shift from the linear business model towards a circular business model is important for 

the success of this transition (Lahti et al., 2018). In some cases, the transformation to-

wards a circular economy might destroy the usefulness of existing capabilities, networks 

and business models (Antikainen & Valkokari, 2016) which can cause significant costs 

because organizations must introduce radical innovations (Lahti et al., 2018). Different 

researchers have presented different categories of challenges. Jesus and Mendonça 

(2018) presented four categories of challenges related to the implementation of circular 

business models. These categories are technical factors, economic and financial factors, 

institutional and regulatory factors, and social and cultural factors. In addition, Geng and 

Doberstein (2008) categorized barriers and challenges into three groups which are policy, 

technology, and public participation. Furthermore, Rizos et al. (2016) identified chal-

lenges of circular economy business model implementation based on a broad range of 

studies and sources. These challenges were divided in this manner: company environ-

mental culture, lack of capital, inadequate government support and effective legislation, 

lack of information, inadequate technical and technological know-how, and lack of sup-

port from the supply and demand network.  

 

Challenges under company environmental culture relate to the organization`s philoso-

phy, habits as well as attitudes and personalities of the company managers and employ-

ees, all which have a deep influence on the behavior for developing a circular economy 



21 

(Liu & Bai, 2014). For example, in many SMEs, the manager may have significant author-

ity over the strategic decisions and they all may not have a positive attitude for the cir-

cular economy (Rizos et al., 2016). Furthermore, operational employees may be skeptical 

of the new circular economy initiatives because there is a fear that these will increase 

the workload (Liu & Bai, 2014). In addition, consumer habits and business routines are 

changing very slowly because of insufficient knowledge regarding the concept of circular 

economy (Jesus & Mendonça, 2018). Also, strong risk aversion and resistance to change 

can hinder the implementation of circular economy.  Decision-makers must estimate the 

actual value proposition before continuing to circular economy practices: to calculate 

the costs of circular procedures and considering the risks of change in the current busi-

ness environment. (Rizos et al., 2016.) 

 

The second challenge which was presented by Rizos et al. (2016) is the lack of support 

from the supply and demand network. The adoption of circular business model implies 

changes in product design, production, and logistics which will demand close collabora-

tion within the whole supply chain (Jabbour et al., 2019). At the strategic level, organi-

zations must embrace a systematic approach to understand where the value is created 

in the value chain (Urbinati et al., 2017). This may require changes to the entire value 

chain as organizations must establish and organize reverse value chain activities that 

cover all activities from product returns to the potential recovery of products maximum 

value (Lahti et al., 2018). Managing these changes in circular value chains can be time-

consuming, expensive and require collaboration with new actors. Furthermore, suppliers 

and partners may be unwilling to participate in circular economy processes because of 

perceived risks to their competitive advantage or due to an attitude that does not prior-

itize circular economy principles. (Rizos et al., 2016.) 

 

According to Rizos et al. (2016), the lack of capital is one of the most significant chal-

lenges related to the adoption of circular economy since transferring from a linear to a 

circular business model requires a significant amount of time and investment on the part 

of the organization. Jesus and Mendonça (2018) defined high capital requirements, large 



22 

transaction costs, high initial costs, asymmetric information and uncertain returns and 

profits as challenges concerning economic, financial and market issues. Implementing 

circular business model demands continuous improvement and monitoring which again 

requires a significant amount of resources (Rizos et al., 2016).  

 

The fourth challenge of circular business model implementation is the lack of govern-

ment support and effective legislation (Rizos et al., 2016). These include misaligned in-

centives, lack of encouraging legal system, and deficient institutional framework which 

all hinder the successful implementation of circular economy principles (Jesus & Men-

donça, 2018). Competition legislation hampers collaboration between companies and 

reduces the understanding of the circular design and development of products. Further-

more, the environmental regulations are not completely effective, and this reduces com-

panies' desire to pursue prospective buyers for their byproducts. (Rizos et al., 2016.) Ac-

cording to Korhonen et al. (2018) modern environmental policy and legislation have 

hampered the utilization of waste flows with permits that complicate to utilize the re-

source embedded in the waste stream. In addition, the resource taxes are quite low 

which encourages companies to buy cheaper raw materials instead of use recycled ones. 

Furthermore, companies can face administrative burden as one barrier. This means that 

monitoring and reporting environmental performance can be complicated and expen-

sive for SMEs. (Rizos et al., 2016.) The adoption of circular business model requires ef-

fective production designing, production planning, and production controlling while sim-

ultaneously estimating a comprehensive analysis of costs and revenues derived from op-

eration in a closed-loop supply chain (Jabbour et al., 2019). These actions demand more 

complex and costly management and planning processes that can be difficult to imple-

ment (Rizos et al., 2016). 

 

In addition, lack of information is one challenge for the circular economy (Rizos et al., 

2016). Information is required for effective planning about the scenarios of optimal re-

duction, reuse, and recycling, and here lack of reliable information is one of the key chal-



23 

lenges (Geng & Doberstein, 2008; Su et al., 2013). According to Rizos et al. (2016) organ-

izations have a lack of information about the advantages of the circular economy and 

lack of practical knowledge about circular practices. Improved communication, exchange 

of information and extensive interactions between stakeholders are critical require-

ments for successful circular economy implementation (Geng & Doberstein, 2008).  

 

The last challenge of circular business model implementation is the inadequate technical 

and technological know-how (Rizos et al., 2016). Technological challenges are mentioned 

in many other studies as well (Geng & Doberstein, 2008; Korhonen et al., 2018; Jesus & 

Mendonca, 2018). For instance, implementing circular business model often requires 

advanced technology as the current technology is related to an existing linear system (Su 

et al., 2013). Changing business-as-usual operations require new sustainable production 

and consumption technologies concerning eco-design, clean production, and life cycle 

assessment, and furthermore competent professionals to manage these new technolo-

gies (Rizos et al., 2016). Additionally, Jesus and Mendonça (2018) presented inappropri-

ate technology, the lag between design and diffusion and lack of technical support and 

training as technical challenges related to circular economy. 

 

 

2.2.2 Drivers of circular business models  

Researchers have identified different drivers and opportunities for implementing the 

principles of circular economy. The drivers are factors that promote the transition to-

wards circular economy (Jesus & Mendonça, 2018). Drivers can be identified as direct 

solutions for clearing the remaining barrier or as favorable conditions when adopting 

circular economy (Rizos et al., 2016). According to Lieder and Rashid (2016), the feasibil-

ity of circular economy implementation is related to the following areas: legislation and 

policy, support infrastructure, social awareness, collaborative business models, infor-

mation and communication technology, product design and supply chain. Rizos et al. 

(2016) named company environmental culture, networking, support from the demand 



24 

network, financial attractiveness, external recognition, individual knowledge, and gov-

ernment support as enablers for the successful adoption of a circular economy. Further-

more, Jesus and Mendonça (2018) divided drivers, as well as challenges, to four different 

categories which are technical, economic and financial, institutional and regulatory, and 

social and cultural.  

 

Firstly, economic drivers are mentioned in many kinds of research on implementing a 

circular economy (Jesus & Mendonça, 2018; Korhonen et al., 2018; Rizos et al., 2016). 

The base is that circular economy is expected to provide economic growth and sustain-

able development (Ranta et al., 2018). Jesus and Mendonça (2018) studied the economic, 

financial and market drivers, and noticed that these drivers can be related to demand-

side trends or supply-side trends. Drivers from demand-side are related to the rising re-

source demand and consequent pressures resource depletion which encourages organ-

izations to improve resource performance and generate new solutions. Whereas drivers 

from the supply-side are related to the increasing resource price and volatility which en-

courages organizations to search solutions for cost reduction and stability. Trends related 

to increasing cost and resource consumption are emphasized as promoters for creating 

a new, more sustainable circular business model. (Jesus & Mendonça, 2018.) Further-

more, Rizos et al. (2016), noticed that the “green business model” can be financially at-

tractive. By this, they meant that organizations may get special funds, such as specific 

start-up financing or local grants, which are available for businesses desiring to imple-

ment a circular economy. Korhonen et al. (2018) divided economic benefits to input-

related and output-related. Input-related economic benefits for implementing circular 

economy are reduced raw material and energy costs, the value of resources which are 

used many times, reduced costs that arise from environmental regulation, taxes and in-

surances and increased green market potential. Output-related economic benefits are 

reduced value losses, reduced waste management, and emissions control costs and re-

sponsible business image that attracts investors. (Korhonen et al., 2018.)  

 



25 

Secondly, social and cultural drivers influence the adoption of a circular economy. For 

instance, social awareness, environmental literacy, shifting consumer preferences from 

ownership to service models and business perception of reputational advantages are 

considered social and cultural drivers of circular economy (Jesus & Mendonça, 2018). 

Additionally, if customers prefer “green” products or services, organizations motivate to 

adopt circular business model more easily. Furthermore, the company culture and the 

attitude and commitment of the staff are the most frequently mentioned drivers to-

wards circular economy. (Rizos et al., 2016.) Also, Lieder and Rashid (2016) underlined 

the importance of social awareness for the successful transition from a linear to a circular 

economy. They argued that to implement a circular economy it is vital to raise awareness 

and thus change people`s mind-sets. Furthermore, the social dimension of a circular 

economy increases the sense of community, cooperation, and participation through the 

sharing economy (Korhonen et al., 2018). 

 

The role of regulatory drivers in the implementation of circular economy is controversial. 

Some argue that regulations and governmental pressure are the key drivers for circular 

economy implementation (Levänen, 2015) and others see lack of government support 

as a barrier to implement circular economy but still do not see government support as a 

significant driver when moving towards circular economy (Rizos et al., 2016). Regulatory 

drivers can be related to increased environmental legislation, environmental standards, 

and waste management directives (Jesus & Mendonça, 2018). Govindan and Hasanagic 

(2018) argued that the government has a high impact regarding the implementation of 

circular economy as implementing the circular economy promises job growth. They ar-

gued that a significant part of job creation comes from greater labor needs which are 

associated with reuse, remanufacturing and repair. Also, Lieder and Rashid (2016) men-

tioned the importance of policy recommendations which aim to create jobs, boost eco-

nomic growth and promote circular business models. Furthermore, legislation, such as 

the EU directives can motivate organizations to create business model innovation and 

differentiate the value proposition, and thus create a competitive advantage (Bocken et 

al., 2014).  



26 

 

Finally, technological development encourages companies towards circular economy 

(Mathews & Tan, 2011). New technologies offer better solutions and solve current prob-

lems related with reduction, reuse and recycle (Ghisellini et al., 2016). The availability of 

technologies that support resource optimization, remanufacturing, regeneration, as well 

as the development of sharing solutions, are important drivers towards circular economy 

(Jesus & Mendonça, 2018). In addition, the improved information sharing platforms fa-

cilitate the adoption of circular economy (EMF, 2013). Information and communication 

technology can be an enabler for product lifecycle management systems whereby organ-

izations can for example monitor products in multiple lifecycles (Lieder & Rashid, 2016).  

 

The aforementioned challenges and drivers are collected in table 2, in order to clarify 

the important aspects which may influence the implementation of a circular economy. 

These challenges and drivers have been categorized into four categories: regulatory and 

political, economic and financial, social and cultural and technological. Table 2 bases on 

the research of Jesus and Mendonça (2018) and Rizos et al. (2016). 

 

 Challenges Drivers  

Regulatory and 

Political  

• Lack of government sup-

port 

• Lack of effective legisla-

tion 

• Resource taxes 

• Administrative burden 

• Increasing environmental 

legislation, environmental 

standards, and waste man-

agement directives 

 

Economic and  

Financial  

• Large capital require-

ments 

• Uncertain return and 

profit 

• Demand and supply-side 

trends 

• Opportunity to get special 

funds 

Social and  

Cultural 

• Skeptical company envi-

ronmental culture 

• Lack of support from the 

supply and demand net-

work 

• Customer Preferences 

• Social awareness  

• “Green” company culture  



27 

Technological  • Lack of information  

• Lack of technical and 

technological know-

how 

• Technological development  

• Improved information shar-

ing platforms 

Table 2. Challenges and drivers of circular economy (modified based on Jesus & Mendonça, 2018 
and Rizos et al., 2016) 

 

 

2.3 Circular business model innovation  

One of the key elements in business model designing is to figure out how to capture 

value from innovation (Teece, 2010). Innovating business models can take two forms 

which are the design of a completely new business model or changing the elements of 

the current business model (Zott & Amit, 2010). To get benefits from innovation, busi-

ness pioneers must understand the business model options as well as customer needs 

and technological movements (Teece, 2010). Traditional business model innovation ad-

dresses the process of devising and realizing economic value (Linder & Williander, 2017) 

whereas circular business model innovation concentrates to meet the economic as well 

as social and environmental benefits (Lahti et al., 2018).  

 

Pieroni, Mcaloone and Pigosso (2019) emphasized the importance of business model 

innovation for circularity because sustainability is converting essential to sustaining or-

ganizations` competitive advantage. As noted before, the circular economy bases on the 

foundation of closed production systems where resources are kept in so-called loops as 

long as possible (Urbinati et al., 2017). Closing these material loops often creates a ne-

cessity for re-designing existing value networks and business models, which require or-

ganizations to engage in the process of circular business model innovation (Antikainen 

& Valkokari, 2016). When an organization implements circular economy principles into 

business models, they need to generate innovations about how to create, deliver and 

capture value while simultaneously capture the environmental, social and economic ad-

vantages (Lahti et al., 2018). Furthermore, the principles of sustainability are acting as 

guidelines for creating circular business model innovation (Pieroni et al., 2019).   



28 

 

The triple bottom line value approach consists of environmental, social and economic 

dimensions that emphasize financial profits, however creating value for the planet and 

people as well (Elkington, 1994). Furthermore, Porter and Kramer (2006) defined the 

triple bottom line value approach as the principle of sustainability as it should secure 

economic performance in the long-term by avoiding socially harmful and environmen-

tally wasteful behavior in the short-term. Nowadays, innovation activities that address 

to create a triple bottom line value are crucial (Weissbrod & Bocken, 2017). Sustainable 

circular business model innovation is the modern way of creating, delivering and captur-

ing triple bottom line value that is achieved through a change of a  business model (An-

tikainen & Valkokari, 2016).  

 

Although business model innovation is identified as a key to deliver social and environ-

mental sustainability, understanding the alternatives available for innovation seems lim-

ited at present (Bocken et al., 2014). There is a clear lack of conceptual consensus and 

consistency in sustainable business models (Evans et al., 2017) as well as in circular busi-

ness models (Lahti et al., 2018). Scholars particularly in the strategic management field, 

are still struggling with a lack of a framework describing how companies can become 

circular and adapt circularity to their existing business model or create a new business 

model (Urbinati et al., 2017). Different authors have created different definitions for cir-

cular business models. Urbinati et al. (2017) created “Degree of circularity”, Renswoude, 

Wolde, and Joustra, (2015) presented “Six cycles”, Bocken et al. (2016) presented “Clos-

ing, slowing and narrowing the resource loops”, Bocken et al. (2014) created “Business 

models archetypes” and Ellen MacArthur Foundation (2015) presented ReSOLVE frame-

work to categorize circular business models. 

 

 

2.3.1 Degree of circularity  

Urbinati et al. (2017) focused on the differences of circular business models emerging 

on two main aspects: customer value proposition and value network. They defined the 



29 

degree of circularity of the customer value proposition or the value network and created 

four available models of implementation of a circular economy: linear, upstream circular, 

downstream circular and full circular. In the downstream circular model, the value cap-

ture and delivery are formed through new revenue schemes and customer interface such 

as pay-per-use models. In the upstream circular model, the value creation systems are 

changed such as reverse logistics. (Pieroni et al., 2019.) The fully circular adoption model 

concerns organizations that implement principles of circular economy in their internal 

activities and relationships with suppliers, as well as in their customer value proposition 

(Urbinati et al., 2017). 

 

 

2.3.2 Six cycles 

Furthermore, Renswoude et al. (2015) presented six cycles that lead to nineteen existing 

business models. These cycles based on Ellen MacArthur Foundation`s “four ways of cir-

cular value creation”. These first four cycles are short cycles, long cycles, cascades, and 

pure cycles. Moreover, Renswoude et al. (2015) added fifth and sixth cycles which are 

dematerialized services and produce on demand. Based on these cycles the nineteen 

existing business models were created. The short cycle contains five business models 

which are pay pre-use, repair, waste reduction, sharing platforms, and progressive pur-

chase. These short cycle models based on maintenance, repair, and adjustment of exist-

ing products and services. The second category is long cycle models which based on ex-

tending the lifetime of existing products and processes. The business models of long cy-

cles are performance-based contracting, take back management, next life sales, resell 

and refurbish. The third category is cascades which refer to creating new combinations 

of resources, and the purchasing of upcycled waste streams. The business models of 

cascades are upcycling, recycling and collaborative production. The fourth category is 

pure cycles which means 100% reusing resources and materials in closed material loops. 

The fifth category is dematerialized services and the business models of this category 

are subscription-based rental and shifting physical products to virtual services. The sixth 



30 

and last category is produce on demand which contains three business models: produce 

on order, 3D printing, and customer vote design. 

 

 

2.3.3 Closing, slowing and narrowing  

Bocken et al. (2016), created an approach that emphasized that the models of circular 

economy aim to slow, close or narrow the loops of resources. These models boost re-

source efficiency and effectiveness by narrowing and slowing energy and resource loops 

and ultimately closing energy and resource loops by changing the way the economic 

value of products is made (Pieroni et al., 2019). Bocken et al. (2016) presented circular 

business model strategies for slowing, closing and narrowing resource loops. Slowing 

resource loops includes access and performance model, extending product value, classic 

long-life model and encourage sufficiency whereas closing resource loops includes ex-

tending resource value and industrial symbiosis. Narrowing loops means reducing re-

source use associated with the production process. This approach is different from slow-

ing and closing as it does not influence the speed of the flow of products and does not 

involve any service loops. (Bocken et al., 2016.) 

 

 

2.3.4 Business model archetypes 

In addition, Bocken et al. (2014) developed eight business model archetypes that are 

formed and grouped according to the main types of business model innovations: tech-

nological, social and organizational oriented innovations. The technological grouping in-

cludes archetypes with dominant technical innovation components such as manufactur-

ing processes and product design, the social grouping includes archetypes with a domi-

nant social innovation component such as innovation in consumer offering and changing 

customer behavior whereas organizational grouping includes archetypes with dominant 

organizational innovation change component. These eight archetypes are: maximize ma-



31 

terial and energy efficiency, create value from waste, substitute with renewable and nat-

ural processes, deliver functionality rather than ownership, adopt a stewardship role, 

encourage sufficiency, repurpose for society and environment, and develop scale-up so-

lutions.  

 

 

2.3.5 ReSOLVE framework 

As previously stated, different authors have suggested different categories of circular 

business models. These categories typically contain the same models which are however 

named a bit differently. ReSOLVE framework by Ellen MacArthur Foundation (2015) con-

sists of six business activities that are regenerate, share, optimize, loop, virtualize, and 

exchange. Heyes et al. (2018) argued that Bocken`s et al. (2014) sustainable business 

model archetypes and the ReSOLVE framework address almost all the same aspects. Fur-

thermore, Lewandowski (2016) designed business models for circular economy and ex-

ploited the ReSOLVE framework as these business actions represent the major circular 

business opportunities. In addition, Ceptureanu et al. (2018) argued that most of the 

business actions specific to circular business models are covered by the ReSOLVE frame-

work. The ReSOLVE framework cannot be referred to as a true categorization, but it iden-

tifies different ways to be circular and thus supports companies during the implementa-

tion of circular economy principles. In different ways, the actions of this framework in-

crease the utilization of physical assets, lengthen their life and shift resource use from 

limited to renewable sources. (EMF, 2015.) Many experts have used this framework as 

an opening for developing their classification methods (Rosa, Sassanelli, & Terzi, 2019) 

and due to the great popularity also this research uses the ReSOLVE framework as a clas-

sification for different circular business models.  

 

The first business action of the ReSOLVE framework is called “regenerate”. This means 

shifting to renewable energy and secondary materials. Reclaim, retain and regenerate 

the health of ecosystems as well as return recovered biological resources to the bio-



32 

sphere (EMF, 2015). This business action can be divided into five different circular mod-

els which are energy recovery, circular supplies, efficient building, sustainable product 

locations and chemical leasing (Lewandowski, 2016). 

 

The second business action of the ReSOLVE framework is “share”. This refers to keeping 

the product loops speed low and maximizing the utilization of products by sharing them 

among different users, by reusing them through their whole technical lifetime and by 

extending their lifetime through maintenance, repair, and design for durability (EMF, 

2015). Sharing can be divided into several models which are; maintenance and repair, 

collaborative consumption, product lease, availability-based product-service system, 

performance-based product-service system, incentivized return and reuse, upgrading, 

product attachment and trust, and hybrid model (Lewandowski, 2016). 

 

 “Optimize” is the third business action in the ReSOLVE framework. This means improv-

ing the performance or efficiency of a product and removing waste in production and 

supply chain without changing the actual product or technology (EMF, 2015). Lewan-

dowski (2016) divides this business action into four models which are asset management, 

produce on-demand, waste reduction, and outsourcing.  

 

The fourth business action of the ReSOLVE framework is “Loop”. This action refers to 

keeping the components and materials in closed loops. For renewable materials, this 

means anaerobic digestion and extracting biochemicals from organic waste and for lim-

ited materials, this means remanufacturing products and recycling materials. (EMF, 

2015). Business models of “loop” are remanufacturing, recycling, upcycling and circular 

suppliers (Lewandowski, 2016).  

 

The fifth business action is called “virtualize”. This action means delivering utility virtually 

instead of materially (EMF, 2015). Lewandowski (2016) presented only one business 

model for this action which is dematerialized services.  

 



33 

The last business action of ReSOLVE framework is “exchange”. This action means replac-

ing old materials, processes, resources with advanced non-renewable materials with ap-

plying new technologies and choosing new products and services. (EMF, 2015). Also, this 

action includes only one business model which is using new technology (Lewandowski, 

2016). All of the above-mentioned business models are collected to table 3. Furthermore, 

the more precise definitions of these business models are offered. 

 

 

BUSINESS ACTION BUSINESS MODEL DEFINITION 

 Energy recovery Using conversion of non-recycla-
ble waste materials into energy 

 Circular supplies Using renewable energy 

 Efficient building Establishing business activities in 
efficient buildings 

REGENERATE Sustainable product loca-
tions 

Establishing business activities in 
sustainable manufacturing loca-
tions 

 Material leasing The producer sells products/ser-
vices functions, and thus mini-
mizes the environmental effects 

BUSINESS ACTION BUSINESS MODEL DEFINITION 

 Maintenance and Repair Expanding product life cycle 
through maintenance and repair 

 Collaborative Consump-
tion and Sharing Platforms 

Enable sharing use or collabora-
tive consumption between busi-
nesses 

 Product Lease Privileged use of a product with-
out being the owner 

 
 
SHARE 

Availability-Based PSS Product or service is accessible 
for the consumer for a certain pe-
riod of time 

 Performance-Based PSS The revenue is generated based 
on the solution or result achieved 

 Incentivized Return and 
Reuse 

Permission to return used prod-
ucts for a pre-established value 

 Upgrading Replacing components with bet-
ter quality ones 

 Product Attachment and 
Trust 

Creating product or service that 
is trusted 



34 

 Hybrid Model Durable product based on short-
lived consumables 

BUSINESS ACTION BUSINESS MODEL DEFINITION 

 Asset Management Internal collection, reuse and re-
sale of used products 

 Produce on Demand Optimize produce on demand 

OPTIMIZE Waste Reduction Waste reduction during and be-
fore the production  

 Outsourcing More effective use of resources 
via outsourcing 

BUSINESS ACION BUSINESS MODEL DEFINITION 

 Remanufacturing Restoring products or compo-
nents to required quality 

LOOP Recycling Recovering resources out of dis-
posed products or by-products 

 Upcycling Reusing of materials and upgrad-
ing their value 

 Circular Supplies Using bio based or fully recycla-
ble supplies from material loops 

BUSINESS ACTION BUSINESS MODEL DEFINITION 

VIRTUALIZE Dematerialized Services Shifting physical products, pro-
cesses or services to virtual  

BUSINESS ACTION BUSINESS MODEL DEFINITION 

EXCHANGE New Technology Using new manufacturing tech-
nologies 

Table 3. Expanded ReSOLVE framework (Modified based on EMF, 2015; Lewandowski, 2016 and 
Ceptureanu et al., 2018) 

 
 
 

2.4 Theoretical framework 

Definitions and classifications of circular economy business models have been described 

in previous sections of this thesis. Furthermore, the implementation is been described 

concerning the challenges and drivers related to the implementation of a circular busi-

ness model. According to the literature, there is no consensus about circular business 

models (Lahti et al., 2018). Scholars are lacking information about explaining how com-

panies can become circular and adapt circularity to their existing business model or cre-

ate a new circular economy based business model (Urbinati et al., 2017). However, the 

ReSOLVE framework (EMF, 2015) covers most of the business actions specific to circular 



35 

business models (Ceptureanu et al., 2018). The case companies of this study are being 

analyzed based on the ReSOLVE framework and business actions of the case companies 

are being compared to the business actions of the ReSOLVE framework. Furthermore, 

the drivers and challenges related to circular business models and circular economy im-

plementation are being analyzed based on the classification by Jesus and Mendonça 

(2018). They divided drivers and challenges into four different categories which are tech-

nological, political, social and financial. Based on these aspects, the theoretical frame-

work presented below was constructed in figure 1.  

 

Figure 1. Theoretical framework 

 

Circular Business Models 

Challenges 
 

Technological 
Political 
Social 

Financial 
 

 

Drivers  
 

Technological 
Political 
Social 

Financial 
 

ReSOLVE 
  

Regenerate 
Share 

Optimize 
Loop 

Virtualize 
Exchange 

 



36 

3 Methodology 

This chapter presents and explains the choices regarding the research methodologies. 

First, the research method of the study is presented. Thereafter the case selection pro-

cess, data collection, and data analysis are covered. At the end of the chapter, the trust-

worthiness of the study is discussed. 

 

 

3.1 Research method  

One of the key elements in the research conducting is the decision about the research 

design. The chosen research design should supplement the research question and thus 

fulfill the research objectives in the given constraints. (Ghauri & Gronhaug, 2002.) This 

study seeks to understand circular business models in the textile industry, what drives 

organizations to implement these as well as what barriers and challenges organizations 

face when they are implementing circularity in their business. A qualitative research 

methodology is often used when the intention of the research is on understanding and 

uncovering a specific phenomenon (Ghauri & Gronhaug, 2002). Qualitative research 

aims at understanding the holistic picture of the phenomenon, rather than different 

parts separately (Yin, 2009).   

 

Furthermore, multiple case study was chosen as a methodology to have comparable and 

rich information about the circular economy in different organizations. Case studies are 

rich and empirical descriptions of a phenomenon that are usually based on a wide range 

of data sources (Yin, 2009). The two principal forms of case studies are single and multi-

ple case study research, and for this research, the chosen form is multiple case study 

because single case study would lack the diversity of views in terms of circular economy 

business models. Single case studies can well describe the existence of a phenomenon 

(Siggelkow, 2007), while multiple case study provides a greater base for theory building 

(Yin, 2009) and shed light on a phenomenon by comparing different cases (Eriksson & 

Kovalainen, 2008). The literature review has shown that the existing theory of circular 



37 

economy business models has gaps that need further elaboration. Thus, multiple case 

study can enable a broader exploration of the research question, and by sampling and 

studying several Finnish companies, it is expected to construct a broader understanding 

of circular business models.  

 

Research can be approached from three different approaches: deductively, inductively 

or abductively. In the deductive approach, a theory that is usually drawn from former 

academic research is formulated and then the established framework is tested in its re-

spective environment. In contrast, the inductive research process begins with data col-

lection and continues with the identification of patterns. Finally, based on these findings 

the theoretical framework is formulated. The third approach is abductive which moves 

back and forth between theory and data. (Eriksson & Kovalainen, 2008.) This study fol-

lows a deductive approach where existing theory is tested in its respective context. The 

goal is then to deepen the understanding of a particular phenomenon (Saunders et al., 

2019).  The deductive approach can be applied for this research because of this research 

bases on the choice of already existing theories that are tested in the empirical part. 

Thus, it is important to acquire as much information about the circular economy business 

models as possible before the research itself. 

 

 

3.2 Case selection process 

The cases for this thesis were selected in a non-random way, through purposeful sam-

pling method. Yin (2009) defines purposeful sampling suitable when cases are chosen 

because they are rich in information and they provide valuable manifestos of the phe-

nomenon of interest. Thus, the chosen cases are selected due to their relevance to the 

thesis` aim. Purposeful sampling was used in this thesis as cases would need to have rich 

information about circular business models in the textile industry, and hence random 

sampling method would not be suitable. Furthermore, four cases were chosen based on 

their size, age and given that they have implemented characteristics of a circular econ-

omy. Regarding the sample size, Eisenhardt (1989) recommends limiting the amount of 



38 

cases to the point where the contribution of extra cases is minimal, and adding more 

cases only if necessary, in order to maintain the flexibility. According to Eisenhardt (1989), 

a number between four and ten cases is suitable as less than four could be unconvincing 

and over ten could be too complex. Patton (1990) argued that there is no stable rule for 

sample size and the appropriate sample size depends on the scope, resource at disposal, 

and the purpose of the study. In this thesis, four cases would deliver an ideal balance for 

the study. This amount would provide information and variation enough in terms of cir-

cular business models. It ensures a wide perspective of the studied phenomenon while 

keeping the process controllable.  

 

To analyze relevant cases, a set of criteria were identified. First, the cases must suit within 

the selected context which is Finnish companies operating in Finland. Second, the case 

companies within the textile industry should differentiate to some extent (e.g. company 

size and age) to get rich information. Third, case companies should have implemented 

at least some of the circular economy principles into their business model. Furthermore, 

the selected case companies must carry the potential to light the research questions and 

thus help the research to achieve its objects. The selected case companies were orga-

nized into two clusters based on their business life cycle. Case companies of the first 

group were microenterprises with less than ten employees. These companies were 

founded in the 2000s and this category was thus named “Developing companies”. Case 

companies of the second group were small and medium enterprises (SME`s) which were 

founded in the early 20th century and this category was named “Established companies”. 

However, all selected companies operate in the textile industry and their business model 

included elements of the circular economy. These two categories were selected for this 

study to get a deeper knowledge of circular business models in different circumstances. 

Developing companies and established companies may confront different drivers and 

challenges in circular business model implementation. Exploring different companies 

gives a more complete picture of the phenomenon, and thus it is the choice of this study. 

Table 4 below will clarify the categories. 

 



39 

 

 

 
 

 

 

3.3 Data collection and analysis 

To gather data for the study, interviews were conducted. Very structured interviews can 

be described with closed questions where the interviewee must answer all questions in 

a structured manner. By contrast, unstructured interviews consist of open questions that 

let the interviewer and the interviewee to talk about the subject on a general level how-

ever including the most important notions in the conversation during the interview. 

(Maylor & Blackmon, 2005.) In this thesis, semi-structured interviews were conducted. 

Semi-structured interviews can include both what and how questions. The data collec-

tion is systematic but at the same time allows the discussion to be conversational and 

casual. (Eriksson & Kovalainen, 2008.) In this way, an interview can bring out a more 

comprehensive picture of the studied phenomenon and allow to pursue additional 

themes during the interview (Saunders et al., 2019). Furthermore, open questions, 

which are used in a semi-structured interview, are appropriate when the researcher does 

Developing  

companies 

 Established  

companies 

 

Case A Case B  Case C Case D  

Operating in  

textile industry  

Operating in  

textile industry 

Operating in 

 textile industry 

Operating in  

textile industry 

Circular economy 
as part of  
business 

Circular economy 
as part of  
business 

Circular economy 
as part of  
business 

Circular economy as 
part of  
business 

Microenterprise Microenterprise Small and me-

dium enterprise 

Small and medium 

enterprise 

Founded in the 

2000s 

Founded in the 

2000s 

Founded in the 

early 20th century 

Founded in the early 

20th century 

Table 4. Summary of the case companies 



40 

not know what answer will be given, or when the researcher is looking for new infor-

mation and ideas (Fisher, 2007).  

 

 According to Eriksson and Kovalainen (2008) in semi-structured interviews, themes and 

questions are prepared in advance, however allowing to pursue more questions during 

the interview. In this research, semi-structured interviews were conducted with three 

principal themes. These themes were: circular business models, circular economy driv-

ers and circular economy challenges. These themes were selected based on research 

questions and the theoretical framework. After the primary data was collected, semi-

structured interviews were planned, and the main questions were prepared (Appendix 

1). Interviews were performed with four interviewees demonstrating the different case 

companies involved in the case study. Three-quarters of the interviewees were CEOs and 

all interviews were recorded and carried out with a phone. The basic information of each 

interview is summarized in table 5. In qualitative research the difference between data 

gathering and data analyzing is unclear. These are interconnected and closely related to 

each other (Eriksson & Kovalainen, 2008.) This study also represented the intertwined 

data collection and data analysis as the ideas for organizing interview data rose already 

in the data collection. At first, the recorded interviews were transcribed in order to han-

dle data easier. Then the data was classified into themes based on the research questions. 

Thereafter, the theoretical data which was formulated from the literature were com-

pared with the empirical data to test the findings and eventually remodel the theoretical 

framework.  

Table 5. Summary of the interviewees 

 Company Role Duration Date of in-
terview 

Channel 

Developing 
companies 

Case A  CEO/Founder 25 min. 10.01.2020 Phone 

 Case B CEO/Founder 38 min. 21.01.2020 Phone 

Established 
companies 

Case C CEO 35 min. 22.01.2020 Phone 

 Case D Vice President, 
Quality 

45 min. 29.01.2020 Phone 



41 

3.4 Quality of the research  

Validity and reliability are the most ordinary standards to evaluate the quality of the re-

search (Saunders et al., 2019). Hence, the research design, data collection, and data anal-

ysis should be thoroughly performed to deliver the highest possible quality (Yin, 2009). 

The reliability of research indicates that the study techniques are documented in a way 

that if another researcher afterward conducts the same study, the findings and conclu-

sions should be the same (Yin, 2009). Whereas the validity of the study refers to the 

generalizability of the findings and whether the results are about what they supposed to 

be (Saunders et al., 2019).  

 

First, the reliability of this research is confirmed with systematic and transparent proce-

dures. The semi-structured interview questions, empirical data, and the theoretical 

model are well-documented, and all interviews were recorded. Furthermore, reliability 

is achieved with a consistent process of data collection. Interviews were conducted with 

the same communication channel and during the interviews, questions were clarified if 

needed to reduce the risk of misunderstanding the interview questions and topics. Fur-

thermore, data collection through interviews was treated anonymously and confiden-

tially.  

 

The second aspect of the trustworthiness is the validity which can be defined as whether 

the results are about what they intended to be (Saunders et al., 2019). The generaliza-

bility of the findings is quite low in qualitative case studies with one or a few cases (Saun-

ders et al., 2019). However, to improve the generalizability of the findings this study was 

conducted as a multiple case study and thus the findings are more generalizable. Fur-

thermore, validity refers to the extent to which the research findings could be replicated 

to other environments. For example, the results of this study could be transferred to 

other industries. Validity also indicates to the credibility and quality of the study (Saun-

ders et al., 2019). This was ensured by presenting a theoretical background of the re-

search, by applying a variety of references and deeply investigating former studies and 

literature about the circular economy.  



42 

4 Findings 

In this chapter, the studied cases are presented. First, each case is explored individually 

and thereafter cases are compared with each other. Within-case analyses intend to de-

liver a comprehensive picture of how each case company has implemented a circular 

economy and the drivers and challenges related to these circular business models. 

Thereafter the idea of the cross-case analysis is to compare the case companies. 

 

 

4.1 Circular economy: ideology of a company  

Case company A: Functional products from recycled material 

 

The case company A is based fully on circular economy. This company was founded for 

philosophical reasons; there is too much material in the world. The company purchases 

production surplus material and waste material, and then redesign them into functional 

products such as bags and accessories. Their products are good quality, ecological as well 

as esthetic. These products are sold both in the store and online. CEO and founder of the 

company highly emphasizes that as the consumption is growing and we only have limited 

natural resources, we must use the existing material and turn it into products we need. 

Case company A is founded and based completely on the circular economy.  

 “The business has been set up following the principles of a circular economy. It is 
not a separate issue but a corporate background and identity.” 

 

As noted before, the drivers of case company A towards the circular economy are mainly 

philosophical. The interviewee mentioned how even their stakeholders become stake-

holders because they advocate a similar way of doing things. Actors that are obligated 

to respect the ecological and sustainable way of doing business become stakeholders, 

and actors that think differently don’t become stakeholders. Furthermore, the inter-

viewee mentioned that technological development improves the functioning of the cir-

cular economy and the achievement of resource efficiency. In addition, the more we 



43 

have information about resource inadequacy, the more our operating environment will 

mentally be in advocacy of circular economy.  

“There are only limited natural resources in the world and yet consumption is in-
creasing, and this equation does not work so we must act.” 
 
“Our stakeholders are “one big family” who respect the same values as we.” 

 

Barriers and challenges for implementing the principals of the circular economy were 

also discussed. The interviewee mentioned how political decision-making doesn’t regard 

the acts that would promote the circular economy. On the contrary, disposable and 

nonecological products have the same VAT as sustainable and ecological products have. 

Interviewee considered how taxation could be an efficient mechanism to regulate the 

production of disposable consumables and thus customer behavior. Furthermore, the 

interviewee mentioned how technological development is somehow inadequate and 

thus acting as a barrier to implementing new practices in the circular economy.  

“Disposable, unethical, nonecological and high resource consuming products` VAT 
is the same as sustainable, ethical and ecological products` have.” 
 
“There are no specific policy decisions that impede the implementation of the cir-
cular economy but neither decisions that would encourage people towards circular 
economy.”  

 

According to the interviewee, innovations are constantly evolving which will help to re-

cycle the material, to sort the material and to purify the material more efficiently. How-

ever, the world is changing too slowly and especially the textile industry is changing too 

slowly as fast fashion is still acceptable. Interviewee highlights that circular economy 

should take root in every industry but especially in the textile industry as it is one of the 

most polluting and consuming industries in the world.  

“It is opening up a whole new world to the circular economy as technology ad-
vances. Unfortunately, development happens painfully slowly.” 

 

 

 

 



44 

Case company B: Receiving material regardless the condition 

 

In addition, case Company B is fully based on the circular economy. Their business model 

contains two different aspects which are both following the principles of a circular econ-

omy. They receive old clothes whether they are usable anymore. Broken clothes leave 

for Germany and Poland where these fabrics are sorted and processed into a mass. This 

new material is thereafter utilized in the car industry and other industrial sectors. Fur-

thermore, clothes in good condition are sold at their store.  

“Our ideology is that all clothes, whether they are dirty or broken, are valid for us. 
Our only criteria are that clothes can’t be wet or smell strong. With this model, we 
can utilize fabrics as much as possible.”  

 

Such as the drivers of case company A, also the drivers of case company B are largely 

ideological. The founder of the case Company B said how it was brutal to see how big 

masses of textiles were thrown into an incinerator. This gave an idea that we must utilize 

and sort the textiles more efficiently and thus case Company B was founded. Further-

more, as the popularity of the circular economy has increased, and people have more 

knowledge about sustainability also the popularity of the case company B has increased.  

”People who understand the circular economy and recycling have brought old 
clothes more than 50 kilometers away. There is motivation to recycle and act eco-
logically.”  

 

In addition, the founder of the case company B emphasizes the importance of the stake-

holders. All their stakeholders are interested in circular economy as well as sustainability. 

The social dimension of the circular economy and caring about nature brings people to-

gether. The interviewee also noticed how cooperation with other companies has taught 

them valuable information and thus he highlights the importance of collaboration. This 

collaboration motivates every actor to be more sustainable and ecological.  

 

According to the interviewee of case company B, challenges related to circular economy 

are multi-dimensional. Firstly, he mentioned how collecting unusable textiles can cause 

a big carbon footprint itself and how the cost of collecting may become too big and thus 



45 

unprofitable. Secondly, Finland`s legislation doesn’t support circular economy and there 

are no tax reliefs related to circular business models. Also, the utilization of waste flows 

has been burdened by legislation. The “owner” of the waste is unclear, and this hinders 

the utilization of waste flows. Furthermore, the interviewee mentions how there is “fiber 

level technology” but people don’t have enough drivers and courage to develop these in 

the textile industry.  

”National collecting of unusable textiles is tricky as Finland is sparsely populated 
and oblong country. This increases the logistical costs and carbon footprint.” 
 
“You must consider all the time about what makes sense and what is profitable 
from many angles. For example, the short-term effects of a circular economy can 
be different from the long-term ones and this requires a deep and comprehensive 
analysis of the circular economy.”  

 

Founder of the case company B emphasized the power of the cooperation and how even 

logistical costs would be decreased with better cooperation. Companies should build 

better networks whereby e.g. capacity of empty vehicles could be exploited more effec-

tively. This would make the collecting of unusable textiles easier and decrease the cost 

and carbon footprint of it. Also, the interviewee emphasized how consumers have the 

power to define with their consumer behavior what are the future trends of the textile 

industry.  

“Consumers must learn how to identify good quality material and let go of dispo-
sable culture. If consumers do this, the textile industry will eventually follow these 
trends and start to invest in good quality and develop a circular economy further.”  

 

Furthermore, the interviewee emphasized the opportunities of technological develop-

ment. Recycling textiles and using recycled textiles to new textiles causes multiple prob-

lems related to the quality of the new textile. As textiles are recycled, the length of the 

fiber is shortened which causes lint on the textile. However, the opportunities of recycled 

materials are great if companies figure out where to exploit these shortened fibers. 

“We must start to think about how to exploit the “side-flows”, how to extend the 
product or material life cycle and how to exploit some synergy effects.” 
 



46 

“Back in the 80s, people have used clothes as insulation and yet the textile industry 
is lacking knowledge about exploiting recycled material properly. This means that 
we have the knowledge, but we just haven’t exploited it in the textile industry.” 

 

 

4.2 Circular economy: rational choice of a company  

Case company C: High quality and timeless textiles as a part of circular economy  

 

The business model of case company C isn’t fully based on the circular economy, how-

ever, the elements of a circular economy are strongly present. This company produces 

timeless and high-quality textiles for consumers, offers a recycling option for their cus-

tomers at their store, and uses industrial cutting waste to manufacture some of their 

products. Furthermore, they are favoring renewable materials where possible.  These 

products are sold both at the store and online. Their core business model is to produce 

high-quality textiles for consumers, but they have implemented elements of a circular 

economy to their business model as responsibility is one of their core values.  

“Our products are designed to be timeless as well as high-quality. Our message for 
consumers is that the greatest eco-statement that they can do is to buy high-qua-
lity products and maintain them as much as possible.” 

 

The interviewee of the case company C mentioned how responsibility is one of their core 

values that guide the business. Thus, the company culture drives towards sustainability 

and the circular economy. The interviewee mentioned how he feels that they are com-

mitted to bringing sustainable options for customers. Consumers, as well as B2B buyers, 

are creating a positive driver as they have shown great interest in sustainable products. 

Nowadays, a circular economy is a rational choice of a company operating in the textile 

industry.  

“Our B2B buyers are interested in sustainable products as thus they can offer 
something new and sustainable for their consumers. However, I believe that res-
ponsibility and sustainability are becoming something that is necessary for every 
company rather than a competitive factor.” 
 



47 

“Also customers are acting as drivers because they are more aware of the disad-
vantages of the textile industry. This motivates us to find more sustainable solu-
tions.” 

 

The interviewee mentioned how one of their biggest challenges is that recycled materi-

als are not as good quality as virgin materials. One of their core values is to make timeless, 

good quality products and consumers' quality expectations are high. When clothes are 

made of recycled materials it always contains some impurities as the fiber is shorter. 

Interviewee emphasized how they would like to try more new recycled material, but 

partners can’t offer these for a reasonable price. This challenge refers to the lack of tech-

nological development. Furthermore, the lack of technological development influences 

the recycling process where different materials should be dissolved from each other. 

However current mechanical processing cannot perform this dissolving effectively.  

“From our point of view, we have the motivation to try more recycled materials but 
there is a lack of commercial solutions for us.” 

 

In addition, although customers' attitudes are acting as drivers, those are also acting as 

challenges. The interviewee mentioned how he has noticed that the customers` attitude 

towards sustainable options and consumption are contradictory. Customers would ra-

ther buy four new t-shirts made of organic cotton than one high-quality t-shirt and main-

tain this carefully. It is difficult to communicate this responsibility perspective and the 

benefits of buying one high-quality garment for customers.  

“Consumers would like to have forgiveness for buying four t-shirts made of organic 
cotton, rather than buying one timeless, high-quality t-shirt. It is difficult to com-
municate this perspective for consumers and change their attitudes.”  

 

Furthermore, the interviewee mentioned how recycling, sustainability as well as circular 

economy are multi-dimensional and the effects of these are not always so simple. For 

example, organic cotton is in principle more responsible from a social and environmental 

point of view but if all textile companies would start to use this, the environmental im-

pacts would be unecological as the area under cultivation would need to hack from the 

rain forest. Thus, one of the biggest challenges of a circular economy is its complexity 

and long-term effects which may differ widely from short-term ones.  



48 

 

The interviewee mentioned how circular economy will be even better implemented and 

exploited when technology develops. For example, the chemical dissolving of fibers of-

fers a great opportunity for a circular economy and when this is developed it opens a 

whole new world where recycled materials are better quality. Furthermore, chemical 

dissolving can be a solution to the textile industry worldwide. In addition, the inter-

viewee mentioned how he believes that recycling becomes more regulated and compa-

nies as well as consumers need to take responsibility for this. However, when recycling 

becomes more regulated there will be more material in the material cycle which will 

affect positively the circular economy. This way companies can more easily utilize the 

recycled material.  

“Car tires have long been recycled and this same regulation certainly comes to the 
textile and clothing industry as well. It is just logical continuum that someone must 
take responsibility for textile recycling.” 

 

  Case Company D: Extending product life through service model 

 

The interviewee of the case company D told how circular economy is part of their busi-

ness model as they are a textile service company. They own the textiles that they rent 

for their B2B customers. The company participates in the designing process where they 

emphasized lifetime design and durable materials. Thereafter the company rents its tex-

tiles and takes the responsibility of textile maintenance. Extending product life and 

bringing service elements into the business model are part of an effective circular econ-

omy.  

“We define in our mission that we are a textile service company, and this strongly 
determines our approach to the circular economy. Textiles that we provide for our 
customers contain service elements such as creating protection for its user or pro-
cess.” 

 

Furthermore, the interviewee mentioned an interesting example of their “quality rating” 

which also promotes circularity in their business model. This quality rating extends the 

textiles' life cycle and enables the most efficient use of the product. Furthermore, they 

recycle old textiles and utilize these for another purpose.  



49 

“The product may be downgraded for different purposes, but not removed from 
the circuit. We have defined different user categories for example waiter who is 
working with customers needs to have clean intact clothes all the time but so-
meone who works in a kitchen can use a little bit low-grade shirt as long as it is 
comfortable and protective.” 

 

The interviewee of case company D mentioned how the drivers towards the circular 

economy come from the company`s basic values. First, the interviewee mentioned how 

the owners of the case company D have created a state of will to grow profitably and be 

a forerunner in the textile industry. This means that company needs to stay up to date 

on trends and develop sustainable solutions for its customers. Continuous improvement 

is one of the company’s basic values and improving a business`s circular economy is one 

of the core areas of improvement. Furthermore, the interviewee mentioned how their 

mission is to develop deep long-term relationships with their customers. Case company 

D wants to continually listen to their customers and bring added value to customers` 

business. Circular economy is one of the things that does not only bring value for the 

company itself but its customers as well.  

“We want to enable our customers to grow their business responsibility. Circular 
economy enables us to deliver a message that adds value to our customers` res-
ponsibility.”  
 
“Enthusiasm and the joy of learning is one of our core values which means that we 
are passionate about continuous improvement. On a larger scale, this means that 
we want to improve our company`s circular economy and therefore sustainability.” 

 

The challenges of circular economy were also discussed. The interviewee mentioned 

how the impacts of circular economy may seem good in the short-term, but the long-

term consequences are problematic. It is difficult to estimate the long-term conse-

quences as it requires visioning the overall impacts of circular economy. For example, 

the impacts of textiles made of 100 % recycled fibers can be negative if the technology 

isn’t developed enough. The textile may end up being uncomfortable, cause allergic re-

actions or some other unpredictable consequences.   

“A metric to evaluate responsible decisions should be balanced. This metric should 
view the end-to-end process of business. It should evaluate manufacturing related 



50 

issues, logistic issues, issues happening during the use, and issues happening at the 
end of the cycle.” 

 

Another challenge that the interviewee mentioned was the insufficient development of 

technology. Interviewee emphasized that if the materials` wear resistance develops, the 

lifetime of the textiles will increase. However, with the current technology, the lifetime 

of textile is too short which is challenging for textile service companies.  

 

According to the interviewee, the greatest opportunities arise when technology devel-

ops. The company would benefit from material development as thus it could extend the 

service life of rental textiles. Furthermore, technological development would help to uti-

lize the textile when it is no longer applicable for rent. An interesting example which the 

company has already implemented is the “quality rating” and “product downgrading”. 

When the textile isn’t applicable for its original use, the company can downgrade it to 

lower quality class and thus textile can get a new life.   

“Technological development enables material development where textiles` wear 
resistance improves and thus lifetime extends. However, companies must still esti-
mate what comes when the life cycle ends.” 

 

 

4.3 Circular economy: business model for textile companies  

There are both similarities and differences between circular business models and the 

observed drivers and challenges between different clusters. These similarities and differ-

ences are collected in table 6 below. 

 

 

 Developing  

Companies 

 Established  

Companies 

 

 Case A 

“There are only limited 

natural resources in 

the world and yet con-

sumption is increasing, 

Case B 

“Our ideology is that 

all clothes, whether 

they are dirty or bro-

ken, are valid for us." 

Case C 

“Our message for 

consumers is that 

the greatest eco-

statement that they 

Case D 

“We define in our 

mission that we are 

a textile service 

company, and this 



51 

and this equation does 

not work so we much 

act.” 

 

can do is to buy 

high-quality prod-

ucts and maintain 

them as much as 

possible.” 

strongly determines 

our approach to the 

circular economy." 

Business 

model 

Functional products 

from recycled material  

 

Receiving material 

regardless the condi-

tion 

 

High quality and 

timeless textiles as a 

part of circular 

economy 

Extending product 

life through service 

model 

Drivers ▪ Philosophical 

reasons  

▪ Increased 

knowledge of 

carbon foot-

print  

▪ Stakeholders 

 

▪ Philosophical 

reasons  

▪ Increased 

knowledge 

of carbon 

footprint  

▪ Stakeholders 

▪ Company 

culture  

▪ Customers` 

preferences